By Julia Padierna-Peralta

In September, Mexico’s Economy Secretariat published in the Official Gazette (Diario Oficial) a decree announcing the elimination or reduction of customs duties on a wide range of components and products in the electronics and information technology industries.¹ The program, known in Mexico as “ITA Plus” is Mexico’s version of the World Trade Organization (WTO) Information Technology Agreement (ITA).² The decree is effective as of September 5, 2002 and affects duty rates on 576 products. This memorandum highlights the key aspects of Mexico’s ITA Plus program and its potential benefits to companies trading with Mexico.

I. Background

The ITA Plus program is a unilateral benefits program intended to curb continuous job and investment losses in Mexico’s electronics manufacturing industry. Increased competition with China in NAFTA countries and other markets for ITA products also prompted Mexico to develop the program.

The ITA Plus program eliminates import and export customs duties on critical inputs, machinery and finished products in the electronics and information technology sectors. ITA Plus follows the lead of the ITA product coverage ³ and expands on it. The program incorporates some ITA products, plus additional ones not covered by the ITA. ⁴

II. Mexico’s ITA Plus Program

ITA Plus eliminates duties on all but a few eligible products. Duties on those products are reduced substantially. These duty reductions are implemented using two mechanisms:

Tariff (TIGIE) Rate Reductions – Normal Trade Relations (NTR) duty rates (formerly known as Most Favored Nation (MFN) duty rates) will be reduced on 292 eligible products listed in Mexico’s new Import/Export Tariff (TIGIE). Except for one product in this group, ⁵ all the products will be reduced to a zero duty rate in stages – as described further below.

Sectoral Program Reductions – 284 new tariff items will be added to Mexico’s Sectoral Program for the Electronics Industry. Except for two items, ⁶ all of the items will be reduced to a zero duty rate, immediately.
TIGIE Reduction Stages and Product Scope – Depending on the tariff classification of the components or product, duties are either eliminated or reduced immediately or on January 1 of each of the next two years.
Immediate Action. 292 products become duty free immediately. ⁷ Products in this group include parts, components and machinery listed in HTS Chapters 84, 85 and 90.

January 1, 2003. 22 products become duty free on January 1, 2003. Products in this group encompass computer equipment products listed in HTS Chapters 84, 85 and 90.

January 1, 2004. 61 products become duty free on January 1, 2004. This group includes products in the telecommunications industry listed under HTS Chapters 84 and 85.
Sectoral Program Product Scope – As noted above, with two exceptions, the ITA Plus products listed in the Sectoral Program for the Electronics Industry become duty free effective immediately. The products affected encompass finished goods as listed in HTS Chapters 84, 85 and 90, and a wide range of inputs ranging from chemicals, plastics, iron and steel products and machine tools, among others. Mexico’s Economy Secretariat is expected to review, and possibly revise, the list of tariff items listed in this Sectoral Program at least once a year. ⁸

III. Who Can Benefit from the ITA Plus Program

ITA Plus promises to benefit hundreds of domestic and foreign-owed companies in the electronics and high technology industries, particularly those heavily reliant on non-NAFTA origin products. They will now be able to import critical products duty free or at lower duty rates. The ITA Plus program is compatible with other Mexican tariff reduction or elimination programs, such as drawback and Sectoral Development Programs. They can all be used simultaneously.

Access to ITA Plus preferential duty rates is not conditioned on export performance or any other particular requirement. To receive the benefits of ITA Plus rates in the Electronics Sectoral Program, companies need only comply with Sectoral Development Program rules. ⁹

We strongly recommend that companies in the electronics and high technology sectors carefully review the coverage of Mexico’s ITA Plus program.

If you would like a copy of the ITA Plus decree or require assistance in reviewing its coverage and potential impact on your company, please contact our Washington, D.C. (info@npwdc.com) or New York (info@npwny.com) offices.

1.- “Decreto que establece diversos aranceles para la competitividad de la industria electronica y la economia de alta technologia” [Decree establishing various duties for the competitiveness of the electronics industry and the high technology economy], D.O., Sept. 4, 2002.

2.- The Information Technology Agreement (ITA) was concluded at the WTO Singapore Ministerial Conference in December 1996. The ITA entered into force on July 1, 1997. At present, 58 countries, accounting for approximately 93% of world trade in information technology products, have endorsed the ITA. By January 2000, most ITA members had complied with their tariff-cutting commitments, except for a number of developing countries which were allowed extended phase-out periods on certain products. Mexico never became a signatory to the ITA, despite the potential benefits of that agreement.

3.- The ITA eliminates customs duties, on a reciprocity basis, on a wide range of information technology products, such as computers, semiconductors, software, and telecommunications equipment, among others. For a list of products covered by the ITA visit the WTO’s website at www.wto.org.

4.- For example, the ITA Plus includes resins, steel and audio & video products, which the ITA does not cover.

5.- Monitors with color cathode-ray tubes, classified under HTS Subheading 8471.60.02, which will carry a duty rate of 11.5%.

6.- Parts of cathode-ray tubes classified under HTS Subheadings 8540.91.02 and 8540.91.03, which will carry a 3% duty rate.

7.- The immediate tariff elimination of this group of products became effective Sept. 5, 2002.

8.- This will give importer-manufacturers the opportunity to request the inclusion of additional critical inputs in the Program. However, there is also the risk that eligible products be removed from the Program.

9.- Mexico’s Sectoral Development Programs establish low, fixed duty rates on the importation of inputs for use in the manufacture of eligible finished products. Our prior memorandums (www.npwtradelaw.com) explain how the Programs work and the potential impact on Mexico-based manufacturing companies.

Julia S. Padierna-Peralta (jpadierna@npwdc.com) is a former liaison to the Mexican Senate and currently an associate with the law firm of Neville Peterson LLP. This article is for informational purposes only and does not purport to provide legal advice.